LOreal to buy back shares from Nestle, plus the company repo

LOréal together with Nestlé has announced that their respective Boards of Directors have approved a strategic transaction for both companies under which LOréal will buy 48.5m of its own shares (8% of its share capital) from Nestlé.

This buyback will be financed partially through the disposal by LOréal to Nestlé of its 50% stake in Swiss dermatology pharmaceuticals company Galderma (a 50/50 joint venture between LOréal and Nestlé), for an enterprise value of €3.1bn paid by Nestlé in LOréal shares (21.2 million shares). The remainder (corresponding to 27.3m LOréal shares held by Nestlé) will be financed by cash for an amount of €3.4bn.

All the shares bought back by LOréal will be cancelled. Following the transaction, Nestlés stake in LOréal will be reduced from 29.4% to 23.29% of the share capital, and the Bettencourt Meyers familys stake in LOréal will increase from 30.6% to 33.31%.

In order to reflect the change of Nestlés stake in LOréals governance, the number of Nestlé representatives on LOréals Board of Directors will be adjusted from 3 to 2 Directors.

Peter Brabeck-Letmathe, Chairman of Nestlé, said: "With this proposed acquisition of 50% of Galderma, Nestlé will pursue its strategic development in Nutrition, Health, and Wellness, by expanding its activities to medical skin treatments. In this respect, Nestlé will create a new centre of activities in this area, through a new entity: Nestlé Skin Health SA. Following the decrease of its stake in LOréal, Nestlé will continue to support the development of LOréal. In this context, Nestlé will continue to act in concert with the Bettencourt Meyers family and the existing agreements, adapted to the new situation, will remain in place."

Jean-Paul Agon, Chairman and Chief Executive Officer of LOréal, said: "This transaction represents a very positive strategic move for LOréal, its employees and its shareholders. LOréal will focus exclusively on its Cosmetics business and its "Beauty for all" mission, its universalisation strategy and its ambition to win one billion new consumers. LOréal will also continue to benefit from the support of Nestlé, which has always been a loyal and constructive shareholder.”

In other news, for 2013, LOréals sales were €22.98bn. Operating profit was €3.875, representing 16.9% of sales. Like-for-like, this equated to an increase of 5.0% on 2012.

Of the companys cosmetic divisions, the LOréal Luxe division grew by the highest percentage at 6.8% like-for-like and 5.3% based on reported figures, with annual sales of €5,865.2m. The strongest growth in geographic zones was in Africa/Middle East, with an increase in sales of 14.3% like-for-like and 9.0% based on reported figures, at €505.1m. Consumer products reported the highest sales of the operating divisions with €10,873.2m, while Western Europe made up the highest earning geographic zone with €7,483.4m in sales.

Commenting on the annual results, Mr Agon, said: "2013 was another year of robust growth for LOréal. The Group achieved sustained sales growth and, in a market whose expansion was more moderate in 2013, accelerated its outperformance versus the market. LOréal is strengthening its worldwide positions across all divisions and all geographic zones." The Consumer Products Division, LOréal Luxe and the Active Cosmetics Division are maintaining a good momentum, thanks to the performances of their major brands. The Professional Products Division is gradually improving. In terms of geographic zones, the Groups growth is well balanced: Western Europe remains very solid, North America recorded another year of growth and market share gains in a less buoyant market context, and the New Markets excluding Japan posted double-digit growth. Lastly, profitability reached a record level in 2013, confirming the relevance of our business model. The quality of these results illustrates the Groups ability to continue to deliver sustainable and profitable growth."